• Aussie consumers are making fewer trips in the car but travelling more on planes and trains. And while we are spending more on little luxuries like shoes, sheets, pillows and sporting goods, we are cutting back on the so-called ‘sinful’ pleasures of gambling, alcohol and cigarettes. Welcome to New Australia.
• The record 3.1 per cent drop in spending on telecommunication goods and services like mobile phones and the internet over the past year is of concern to the government given the push for the National
  Broadband Network.
• The latest trends in consumer spending were gleaned from unpublished Bureau of Statistics data on household spending provided to CommSec.

What do the figures show and what does it all mean?

• The latest detailed data on consumer spending has provided new insights into consumer behaviour. Aussies are cutting back on so-called ‘sinful’ indulgences like alcohol, cigarettes and gambling. At the same time we appear to be using our cars less often, or going for shorter journeys with spending on petrol down sharply. But while we seem to be in our cars less often, travel on trains and planes has increased markedly over the past year.
• In real (inflation-adjusted) terms, spending on petrol fell 5.2 per cent in the year to September – the biggest decline in 25 years of records. The 3.1 per cent fall in spending on telecommunication goods and services was also a record, perhaps suggesting that Australia is reaching saturation point for goods like mobile phones.
• Spending on gambling slumped 4.6 per cent over the past year with cigarettes & tobacco falling 2 per cent in response to higher prices, while spending on beer, wines and spirits was down 1.4 per cent.
• The 40 per cent lift in spending on computers reflects lower prices and government incentives. And spending on cars rose 13.5 per cent over the past year in response to cheaper prices. Increased global competition by auto-makers and the stronger Aussie dollar have been key influences driving car prices lower.
• Just like their US cousins, Aussie consumers have adopted a “barbell” strategy on their spending. At one end of the scale, consumers have been cutting back on goods that were previously considered to be spending mainstays like alcohol, gambling and mobile phones. But consumers have sought to reward themselves for their discipline and cost cutting by spending on little luxuries like shoes, sheets, pillows, digital cameras and short domestic flights or getaways.
• Not only are Aussies spending more on shoes and pillows, but visits to cafes and restaurants lifted by 5.5 per cent in real terms over the year.
• Spending on domestic air travel leapt by 11.7 per cent over the past year while hotel accommodation rose by 8.8 per cent. Clearly tour operators may bemoan the absence of foreign tourists, but perhaps they need to lift marketing to the domestic market. Certainly more Aussies seem to be jetting interstate for long weekends – perhaps shopping excursions in Melbourne, or fun-in-the-sun weekends on the Gold Coast.
• Also in the ‘little luxuries’ column is spending on “personal care” – a category that covers a range of items – with real spending up 6.2 per cent over the year.
• At the other end of the scale, visits to the doctor (down 0.1 per cent) and dentists (down 1.2 per cent) have been on the outer over the last year according to the latest spending figures while spending on food was up just 1.6 per cent in real terms, well below the 3.2 per cent lift in total household spending.
• The conservative nature of our spending behaviour has also been on show in the 5.2 per cent lift in outlays on insurance and financial services over the past year, including a 4.5 per cent lift in motor vehicle insurance.
• How long this new age of conservatism continues remains to be seen. But for now, Aussie consumers are making very specific choices, trimming what, in the past, may have been regarded as essentials – gambling, alcohol, cigarettes and trips in the car – in preference for the occasional little luxury of a weekend away, new ring or bracelet or watch.
• The data from the Bureau of Statistics is available in nominal and real (inflation-adjusted) terms. We have focussed on the real measures for this analysis.

Implications

• Some consumers look at the rising cost of utility bills or their monthly rent or mortgage payments and feel that they have no alternative but to cut back on spending in other areas. Interestingly it is previous mainstays like beer, wine, cigarettes and gambling that have been in the firing line. Many have probably concluded that they have over-reacted and have found room in the budget for little indulgences. Others have merely sought to reward themselves for taking the ‘hard’ decisions.
• Whatever the rationale, consumers are very selective about purchases, are more active in budgeting, doing comparison shopping and scouring for bargains. Retailers remain under pressure in this environment.

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